This is 'The Bubble' which 2008 was 'The Warm Up'!

... It is going to take longer to unfold then people think!

Graham Summers is the Chief Market Strategist with Phoenix Capital Research
in Washington, DC. Phoenix capital research is an investment research firm,
that has clients in 56 countries around the world, specializing in investment
research on a subscription basis.

Japan's NIRP announcement & the US$

Japan is at the forefront of the Keynesian central planning that has been
in the markets for the past few decades. The federal reserve first went to
ZIRP and launched quantitative easing in 2008. The European central bank went
to ZIRP and they launched QE in 2015. The bank of Japan first went to ZIRP
in 1999, in which they then launched quantitative easing in 2000. They're much
more experienced in seeing what these sorts of policies can accomplish.

A week or two before NIRP was announced, Kuroda, the head of the Bank of Japan
announced that Japan's potential GDP growth was 0.5% or lower, which is an
astounding admission, implicitly admitting that no matter how much money is
printed or what monetary policy will be used, Japan's GDP will not and cannot
break above 0.5%.

Graham states, "From a psychological perspective, this is like a central
banker saying, 'we don't have the tools required to generate economic growth'
- Similar to a doctor saying, 'no matter how much medicine you take you won't
possibly get better'."

That was the beginning of the end. "It wasn't too surprising for me that
shortly thereafter when the Bank of Japan went to NIRP, the market reaction
was terrible. When you reach the end game for central banking omnipotence,
there are no longer positive results from central bank policy."

"Anytime you cut interest rates, or launch quantitative easing, there will
always be negative as well as unintended consequences. The one positive consequence
since 2008 is that when these policies are launched, stocks go up" "None
of these policies really generate economic growth, they're all about the
bond bubble."

Graham mentions that when Kuroda launched NIRP, the positive consequences
of that policy which is the Japanese stocks rising, only lasted one day. The
negative aspects exist, and Japan has since had to cancel a bond auction due
to a lack of interest, which in Japanese history, has never happened. Meaning
that Japan was not able to sell it's debt on the markets because investors
did not want to buy bonds at a negative yield. "When the crisis hit in 2008,
all central banks coordinated their responses, however, this was in a fiat
world, where everything was relative. All the policies consisted of currency
debasement, with the idea of inflating away debt payments." The problem with
this is that when any one country launches any policy, it has an adverse effect
on the currency against which their currency trades. The most obvious example
being the euro vis-à-vis US federal reserve and the dollar. The euro
represents 56% of the value against which the dollar trades, if the ECB does
anything to push the euro down, the dollar would naturally go up. The bank
of Japan and the European Central Bank employing NIRP, should be very dollar
positive. However, for years hedge funds have been betting very large leveraged
sums that are shortening the yen and going long on the Nikkei, when the Bank
of Japan implemented NIRP and the negative consequences occurred, that trade
began to surge, as did the yen, and the Nikkei collapsed. What this has done
is forced very many institutions and hedge funds to liquidate their positions.

"We are seeing the yen soaring and the dollar is falling as a result.
That is not based on any fundamentals, that is just liquidity sloshing
around the system. From a global perspective, what the bank of Japan did
should be very dollar positive and I believe it will be proven to be the
case."

"We are in such a central planning oriented world that what has been
driving markets in the short term is perspective on what central banks
are going to do."

An Imploding Bond Bubble

The bond bubble is the bedrock of the financial system, it is over $100 Trillion
in size, and is going to take years to deflate. The first wave of deflation
was the high yield bond market, which has begun to implode. It will also feature
emerging market corporate debt defaulting. Slowly, one by one each foot will
fall until we will reach the sovereign bond default but it will take months,
if not years.

"Oil experiencing a 60% price collapse in about a 6 month period in 2014,
was really the bond bubble, the junk bonds in the energy sector blowing
up. The bubble we're dealing with right now is the crisis to which 2008
was the warm-up, and it will take much longer to unfold than people think."

Gold

Gold was in a bit of a bubble in 2011, it was so far overextended above it's
overall bull market trend line, it was bound to collapse. When that collapse
is combined with central bank manipulation and the effort to suppress gold,
you're going to see an asset class struggle for years to find it's legs again.

Since China devalued the Yuan in August - September, gold has begun to outperform
stocks. Since Japan went to NIRP this process has accelerated dramatically.
It appears for the last 6-7 years, investors were loading into stock as a hedge
against central bank policy, and gold would also benefit from this. This trend
reversed in 2011, investors continued to use stocks as a hedge against central
bank policy, but they abandoned gold. That seems to have reversed, investors
are now moving into gold as a hedge against central bank error and stocks are
suffering. The reason gold is having such a dramatic move is that the gold
market is so much smaller than stock, that when you start seeing large scale
chunks of capital moving into gold, the movements become very significant.

Custodial Risk

Graham explains that custodial risk is the question of what an individual
actually owns. He uses the example of buying stock and how individuals no longer
receive a paper certificate, and the assets are held digitally, usually in
a broker's account. If the financial institution who is sitting on these assets
for you, goes out of business, what are people to do with their money? Graham
illustrates that gold and physical cash is so appealing due to the lack of
custodial risk.

Gordon T. Long has been publically offering his financial and economic writing
since 2010, following a career internationally in technology, senior management & investment
finance. He brings a unique perspective to macroeconomic analysis because
of his broad background, which is not typically found or available to the
public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years.
Earlier in his career he was involved in Sales, Marketing & Service of
computing and network communications solutions across an extensive array of
industries. He subsequently held senior positions, which included: VP & General
Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL -
Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of
Cambex, a highly successful high tech start-up and public company (Nasdaq:
CBEX), where he spearheaded global expansion as Executive VP & General
Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly
emerging Internet Venture Capital and Private Equity industry. A focus in
the technology research field of Chaos Theory and Mandelbrot Generators lead
in the early 2000's to the development of advanced Technical Analysis and
Market Analytics platforms. The LCM Groupe is a recognized source for the
most advanced technical analysis techniques employed in market trading pattern
recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion
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is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in
Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive
5 year specialized Co-operative Engineering program he pursued graduate business
studies at the prestigious Ivy Business School, University of Western Ontario
(Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently
selected to attend advanced one year training with the IBM Corporation in
New York prior to starting his career with IBM.

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